This article investigates the issue regarding how a regulator rectifies inefficiencies associated with the negative externality from development in a framework where the regulator imposes a constraint on tax revenues. This article assumes that developers in a competitive real estate industry determine the optimal timing to enter this industry. These developers will ignore the negative externality, thus entering the industry earlier than is socially optimal. The regulator can impose taxation both before and after property development to induce developers to choose the same timing as chosen by a social planner. Unlike the previous research, this article also assumes that the regulator intends to collect a certain level of tax revenues. We investigate how the regulator should change property taxes in response to changes in the underlying exogenous forces such as the expected growth rate of demand for developed properties, the volatility of that growth rate, and the discount rate of developers.